2007 (5) TMI 43 - AT - Central Excise

Demand Revenue contended that appellant (100% EOU) imported good under exemption of duty but it diverted to the local weavers and accordingly demand were made alongwith penalty and interest Held the contention correct and demand penalty and interest were sustainable

Summary

Issues Involved:
1. Receipt and utilization of yarn by M/s. Santogen Textile Mills Limited (STML).
2. Documentary evidence versus oral statements.
3. Applicability of duty demand on consignee versus consignor.
4. Penalty imposition on directors and executives.

Detailed Analysis:

1. Receipt and Utilization of Yarn by M/s. Santogen Textile Mills Limited (STML):
The primary issue revolves around whether the yarn supplied by fourteen other 100% EOUs to STML was received and used for manufacturing export products. The Revenue's contention is that the yarn was diverted to local weavers and not used in the manufacture of exported fabrics. This claim is supported by statements from suppliers, transporters, and discrepancies in records such as octroi entries and job worker statements. The Commissioner confirmed a duty demand of Rs. 5,26,56,632/- on STML, asserting that the raw material was not used in the manufacture of exported products.

2. Documentary Evidence versus Oral Statements:
The appellants argued that the raw material was received and utilized as evidenced by re-warehousing certificates, D-3 intimations, and documents countersigned by Central Excise Officers. They contested that the department's case was based on oral statements, which should be disregarded in favor of documentary evidence. However, the tribunal noted inconsistencies in the appellants' records and statements, lack of job work permissions, and discrepancies in the composition of exported fabrics. The tribunal found that the goods were not delivered to the 100% EOU premises and were diverted, thus supporting the Revenue's case.

3. Applicability of Duty Demand on Consignee versus Consignor:
The appellants argued that if the goods were not received by them, the duty should be demanded from the suppliers (consignors) as per Notification No. 1/95-C.E. and Rule 156B of Central Excise Rules, 1944. The tribunal, however, upheld that once the goods are delivered to the consignee, the responsibility for proper accountal and utilization rests with the consignee. The tribunal cited various decisions supporting this view, affirming that the consignee (STML) is liable for the duty.

4. Penalty Imposition on Directors and Executives:
The tribunal examined the penalties imposed on the directors and executives of STML. It found no material evidence to show that Shri Vinod Deora and Shri Suresh Deora were involved in the illegal activities, thus setting aside the penalties on them. However, it upheld the penalty on Shri Manik Sharma, reducing it from Rs. 50 lakhs to Rs. 10 lakhs due to his involvement. The penalty on M/s. STML was also reduced from Rs. 5,26,56,632/- to Rs. 25 lakhs, considering it excessive.

Conclusion:
1. The duty demand of Rs. 5,26,56,632/- along with interest is upheld.
2. Penalties of Rs. 50 lakhs each on Shri Vinod Deora and Suresh Deora are set aside.
3. The penalty on M/s. STML is reduced to Rs. 25 lakhs.
4. The penalty on Manik Sharma is reduced to Rs. 10 lakhs.

The appeals are disposed of in these terms.